Initial index points to family meetings and wealth transitions as potential friction points
Jenkintown, Pennsylvania (January 3, 2018 ) – Pitcairn, the leading family office specializing in maintaining and accelerating the wealth momentum of ultra high net worth (UHNW) families, unveiled today the results of its first ever Wealth Momentum™ Index survey. The first-of-its-kind index is an ongoing effort designed to help UHNW families benchmark and understand how they are managing key aspects of their wealth across both financial and family spheres. Participants are asked to rate the current state of their family’s performance in 10 key areas on a scale from one to 10. The scores of all respondents are averaged to give a broader view of the areas in which UHNW families are struggling and where they are succeeding. The initial survey was conducted at Pitcairn’s annual Family Wealth & Investment Forum and included 24 respondents.
The index revealed that families found certain areas of wealth more challenging to manage than others, with clear distinctions between sources of wealth momentum and family friction. In particular, family meetings and wealth transitions to succeeding generations stood out as points of contention for families with low average scores of 5.3 and 5.7 respectively. These two areas stood in contrast to a majority of the categories surveyed as both scored significantly lower than others. Family meetings, for instance, scored more than a point lower than the average of all the combined scores and more than two points lower than the highest rated category. From an overall standpoint, there was a higher level of confidence in the management of financial issues compared to family issues, with an average score of 6.9 for financial areas when compared to 6.3 for family areas.
“The results of this initial index confirm what we at Pitcairn have known for a long time – that family issues are often harder for wealthy families to manage than financial issues,” said Pitcairn President and CEO Leslie Voth. “That’s why we’ve built an approach that balances both the financial and family dynamics of wealth to deliver better outcomes and more sustained wealth momentum for our clients.”
Even when evaluating financial elements of their wealth, those that involve family and personal convictions were more likely to cause strife within families. Specifically, trusts and philanthropy scored 6.7 and 6.8 respectively, noticeably lower than scores for more financial issues like investments and tax. Investments ranked as the area where respondents felt most confident with an average score of 7.3, while tax scored an even 7.
“When it comes to protecting a family’s assets and legacy over generations, the differences in these scores can compound to create significant challenges,” said Pitcairn Managing Director of Strategy Andy Busser. “Figuring out exactly where those friction points exist and benchmarking your family’s unique situation against others are key steps in maximizing your wealth momentum through transitions and successions.”
The Wealth Momentum™ Index was developed by Pitcairn to help UHNW families evaluate all aspects of their wealth. It asks families to score their personal wealth momentum, defined as the positive interplay of financial and family dynamics, across the following areas:
- Wealth Transition
- Decision Making
- Family Meetings
- Values & Mission
- Wealth Administration